China wants to break the ultimate taboo and buy into Western companies such as Apple, Boeing and Intel

China has punctured the last delusion. There will be no rescue of Italy until
Europe agrees to major strategic concessions, and only after EMU's fiscal
sinners clean house.

The suggestion that the Chinese government should build up strategic holdings in America's leading industrial and technology companies is likely to cause great unease on Capitol HillPhoto: Getty Images

Chinese premier Wen Jiabao was soothingly polite in his speech to the World Economic Forum in Dalian, insisting that his country will play its part to "prevent the further spread of the sovereign debt crisis".

The language toughened a few notches when asked later how far China's Communist Party is really willing to go. The message was clipped and severe. Beijing will not sign a blank cheque for European states that have failed to carry out deep reform. "Countries must first put their own houses in order," he said.

Mr Wen said he had spoken to José Manuel Barroso, the president of the European Commission, laying the conditions for Chinese intervention.

"I made clear to him that we are confident Europe will overcome its difficulties and make a full recovery. We have on many occasions expressed our readiness to extend a helping hand, and that we are willing to invest more in European countries."

"At the same time, we need bold steps to give redirection to China's strategic objective. We believe they should recognise China's full market economy status," he said, referring to World Trade Organisation (WTO) rules.

"To show one's sincerity on this issue ... is the way a friend treats another friend," he said, answering a question after his speech.

Li Daokui, a rate-setter at China's central bank, warned that nobody should delude themselves about China's willingness to play the role of white knight.

"I don't think any country can be saved by China in today's world. Countries can only save themselves by pushing through reforms," he told a panel at the forum, echoing language from German Chancellor Angela Merkel.

China's central bank must stop investing its hard-earned wealth in Western debt, switching instead into infrastructure, highways, railways and postal systems in countries such as the US, and even breaking the ultimate taboo by purchasing equities.

"The incremental parts of our of our foreign reserve holdings should be invested in physical assets," he said.

"We would like to buy stakes in Boeing, Intel and Apple, and maybe we should invest in these types of companies in a proactive way."

"Once the US Treasury market stabilises we can liquidate more of our holdings of Treasuries," he said.

The comments mark a shift in China's strategic thinking since the US was downgraded to AA+ by Standard & Poor's over the summer.

Until now the stated policy has been to lower China's share of US debt holdings within its $3.2 trillion reserves by diversifying fresh money into other assets and currencies, rather than by running down its portfolio of US Treasuries

Mr Li said America's "debt dynamic" is precarious and dismissed the debt-ceiling compromise between the White House and Congress as window dressing. "They are just trying to buy time and procrastinate," he said.

The suggestion that the Chinese government should build up strategic holdings in America's leading industrial and technology companies is likely to cause great unease on Capitol Hill.

A switch into hard assets would be neutral for the dollar, allowing China to continue holding down its currency to maintain its global export share. The country is still accumulating $200bn in fresh reserves each quarter.

Whether the US and other Western states will allow the Chinese government and state companies to buy strategic chunks of their industry in this fashion is an open question. It would also mark a revolution in global central banking, where orthodoxy views equities as off limits for reserve holding.

Mr Li said any such plan by China would require a change in policy by Washington. "There is plenty of money ready to be invested in the US, but all you let us buy is Treasury bonds."

He said China had shown itself to be a responsible stakeholder in the global system. "China is the most patient investor in the world. Imagine if our $3.2 trillion in foreign reserves had been controlled by George Soros: financial markets would be in much greater chaos," he said.

SAFE, the arm of the Chinese central bank that handles its foreign reserves, has accumulated roughly €800bn of eurozone bonds over the past decade, mostly from the AAA core such as Germany, France and the Netherlands. This has been a crucial factor explaining the strength of the euro.

It has intervened a number of times in peripheral markets since the crisis began, allegedly accumulating €50bn (£43.48bn) of Spanish debt.

However, the relentless climb in Spanish and Italian yields over the summer indicates clear limits to Chinese buying. China's central bank has already suffered a large paper loss on Portuguese debt bought with much fanfare before that country needed a rescue.

Giulio Tremonti, Italy's finance minister, said it is hard to persuade Asian investors to buy Italian debt when the European Central Bank hesitates to do so.

China's sovereign wealth fund - China Investment Corporation (CIC) - has been in talks with Italy but is more interested in buying key industrial and strategic assets.

Lou Jiwei, CIC's chief, came under attack in China for losses on US investments after the Lehman crisis. He is unlikely to risk his career a second time by taking a gamble on Italian or Spanish debt.

He reportedly told a cadre of party leaders that Europe had done China a favour by repelling Chinese investment before the financial crisis. "They saved us a lot of money," he said.

Market status under the WTO has become the Holy Grail for China, not just because it makes the country less vulnerable to "anti-dumping" sanctions from the EU and the US but also because it marks the country's final coming of age in the global economy.

Beijing is bitter that the EU recognises the market status of Russia despite open violations of WTO rules by the Kremlin, claiming that the "double standard" is a disguised form of protectionism.

Under its WTO accesssion accord in 2001, China remains a "non-market economy" for 15 years unless other members agree to fast-track the process. Beijing fears that the goalposts may shift again by the time 2016 arrives.